“Crowdfunding” bill stalls in Senate

Legislation that would allow companies to raise capital online in increments of up to $10,000 per investor sailed through the House in early November by a 407-17 vote. But the momentum to allow so-called “crowd funding” has slowed considerably in the Senate, as lawmakers mull whether unsophisticated investors are vulnerable when capital formation occurs online.

The rush to deliver a mechanism for small businesses to raise capital — a function that banks apparently remain too nervous to provide — would instead deliver a boiler-room-revival-program. Not that I disagree with the goal underpinning the legislation. It definitely ought to be easier for small businesses to raise startup capital. But not at the expense of abandoning common sense protections that help enhance confidence in our securities markets.